Andean cloud forests play an important role in watershed hydrology and protection against erosion. Even though most cloud forests fall under officially protected areas, a good deal of the cloud forests are being deforested and replaced by pastures for grazing cattle, which is the most important land use in Venezuelan cloud forest environments. The water dynamics of the natural forest as well as the impact of replacement by pastures are poorly understood. We have been conducting a research project since 1996, in order to study some of the water fluxes of the forest and to evaluate the hydrological impact of replacement by pasture. The study site is located at La Mucuy (2300 m with 3124 mm rainfall), Merida State, in the Venezuelan Andes. The results show that, in the forest, 91% of total incoming water was from rainfall and 9% was from cloudwater. Total foliage interception was 51%, which is a high value for a tropical montane forest. About 49% of the total incoming water reaches the ground as throughfall, whereas litter intercepts 6% of the water and a final 1.4% was lost by surface runoff. Therefore, infiltration must be about 42%. Approximately 16% was lost by transpiration leaving about 26% for drainage. Results from pastureland studies show 7% interception, while surface runoff (2%) and transpiration (about 66%) were higher than in the forest. Our first results on soil water status suggest that the forest soil (upper horizon) has a significantly higher % moisture than the pasture soil.